Corporate social responsibility (CSR) is an initiative taken by companies to take and assess the company’s effects on social and environmental well being. This applies to efforts that go beyond what is required by law. CSR has become an integral part of business practice in this century.  Large companies   are powerful entities and can sometimes trump the interests of the sovereign states. Corporate interests also harm local communities and it is only fair for them to give back to the society in different ways.

Servaes & Tamayo (2013) seeks to investigate the impact of corporate social responsibility on the value of the firm. It investigates the role of the customer awareness created by the CSR. The goal was to determine under which conditions CSR is beneficial. CSR enhances the value of firms since is some kind of advertising. However, when there is CSR concerns, firms are also penalized.

To create value, companies must publicize the CSR activities for them to create value. The information about the CSR activities should be intensifying advertised to the public. This is because it is not viable for a company to incur the cost of engaging in CSR activities without realizing the benefits (Servaes & Tamayo, 2013). Such a company will have poor corporate governance and the management is not focused in maximizing the strength of shareholders.

Evidence suggest that companies which wish to engage in publicizing CSR activities can only add value if the activities and the reputation of the firm are aligned. If a company has a negative reputation, then the CSR activities will not add any value since the company will have already lost value with the negative reputation. In this kind of a situation, such activities can have the opposite effect (Servaes & Tamayo, 2013). However the activities can create value if they manage to change the perceptions of the firm. CSR activities are meant to give back to the society but also as a method of advertising. However, it is significant fie a company to publicize the CSR activities to derive any value.

This article reveals that CSR activities are significant in the creation of value to the firms. However, it largely depends on the kind of awareness created to the public. Business conducts CSR activities beyond what is required by the law as a form of advertising. Advertising depends largely on awareness. If a company engages on CSR activities without creating awareness, it will not create any awareness.

Drawing on several theoretical bases, it can be argued that firms with better inside-out corporate abilities generate more market value from CSR activities. Firms with poor corporate abilities will in most cases find that CSR activities harm the customer satisfaction thus decreasing stock performance (McWilliams Siegel & Wright, 2006). CSR activities create customer satisfaction thus increasing then market value of the firm.

CSR activities are important to the firms. They do not just allow the companies to give back to the society but also acts as a form of advertising. Consumers are interested in firms that give back to them through several social projects. However, companies which engage in CSR activities but do not publicize the effort fail to meet the objective of increasing value to the firm.

References

McWilliams, A., Siegel, D. S., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of management studies, 43(1), 1-18.

Servaes, H., & Tamayo, A. (2013). The impact of corporate social responsibility on firm value: The role of customer awareness. Management Science, 59(5), 1045-1061.

 
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